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Volatility spillovers across the spot and futures oil markets after news announcements

Author

Listed:
  • Apostolakis, George N.
  • Floros, Christos
  • Gkillas, Konstantinos
  • Wohar, Mark

Abstract

We study the influence of OPEC announcements on volatility transmission across the Brent and WTI oil markets. First, we examine the impact of information shocks with the use of a VEC-MGARCH model, allowing for asymmetry and structural breaks. Second, we examine the transmission of volatility across crude oil markets with the use of a dynamic connectedness approach. Our results demonstrate the existence of asymmetry in the responses to shocks during the Russia-Saudi Arabia oil price war. Furthermore, we find larger volatility responses for the Brent futures and spot prices after negative shocks in the COVID-19 period compared to shocks in the pre-COVID-19 period. Additionally, our results from the dynamic volatility connectedness model suggest that the WTI spot and futures markets are net transmitters of volatility shocks.

Suggested Citation

  • Apostolakis, George N. & Floros, Christos & Gkillas, Konstantinos & Wohar, Mark, 2024. "Volatility spillovers across the spot and futures oil markets after news announcements," The North American Journal of Economics and Finance, Elsevier, vol. 69(PA).
    • Handle: RePEc:eee:ecofin:v:69:y:2024:i:pa:s1062940823001250
    DOI: 10.1016/j.najef.2023.102002
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    More about this item

    Keywords

    Asymmetric effects; Volatility spillovers; MGARCH; Volatility impulse responses; Futures; VECM; DCC; Connectedness index; COVID-19 pandemic;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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